Evergrande debt restructuring progresses as more creditors get on board but credit risk concerns remain

Property developer Evergrande’s debt recast plan gets nod from 30 per cent of Class C debtholders and 64 per cent of Tianji debt holders, short of the 75 per cent threshold

Analysts say Evergrande continues to represent a very significant credit risk, still needs up to US$44 billion in additional financing in the next three years

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The Evergrande Mingdu residential complex, owned by Evergrande Group, is seen in Huai ‘an, Jiangsu province, China. Photo: Getty Images

Published: 3:20pm, 28 Apr 2023Updated: 3:52pm, 28 Apr 2023

Debt-laden property developer China Evergrande Group said more creditors have given support to its US$19 billion offshore debt restructuring plan that it proposed last month, according to a filing on Thursday evening.

Among the four groups of creditors, Evergrande’s plan has so far got the approval from those holding more than 77 per cent of the class A debt, over 30 per cent of the Class C debt, over 91 per cent of the Scenery Journey notes, and over 64 per cent of Tianji Holding debt instruments.

This marked progress since its April 3 announcement, when creditors holding about a fifth of the notes issued by Evergrande and those holding more than a third of the Scenery Journey notes had given their assent to the debt restructuring proposal.

Still, the developer needs the approval from those holding at least 75 per cent of the amount owed to each group of creditors in order to move ahead with its restructuring plan. The developer has extended the deadline to May 18 to hit that threshold.

This aerial photo taken on December 3, 2022 shows a housing complex by Chinese property developer Evergrande in Huaian, in China’s eastern Jiangsu province. Photo: AFP

Earlier this week, Evergrande, one of the world’s most indebted property developers, sweetened the restructuring proposal. Under this plan the developer said it would buy some residential projects from its new energy vehicle (NEV) unit for a nominal 2 yuan (29 US cents) to help the carmaker write off liabilities of around 24.8 billion yuan. However, analysts said it was a “transfer of some loss-making assets from one arm to another” and that it would not alter the NEV unit’s outlook.

Analysts say it would be critical for the group to get support from those holding the Class C debt, as only a small minority had agreed to the terms.

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